Thursday, February 3, 2011

Virginia’s HOAs getting ready to hold homeowners in contempt

Legislation careening toward the Governor will streamline HOA’s power to force homeowners to comply with architectural guidelines or be held in contempt by a judge.

On January 14, here, I described SB1327 and its identical house counterpart HB2289. These bills are flying through both chambers and there is substantial risk that nearly identical bills will pass both chambers before crossover (the time after which each chamber may only consider bills passed by the other chamber). If this happens citizens are essentially assured that broad new powers will be put into the hands of HOAs.

The major problem: SB1327 and its identical house counterpart HB2289 give HOA’s the power to obtain a court order from a General District Court [GDC] Judge forcing a homeowner to comply with architectural guidelines under threat of being held in contempt of court.

Why the HOAs want this power: Right now if there is a violation of architectural guidelines (or other covenants) the HOA can fine you up to $900.00 for an ongoing violation. The HOA can put a lien on your property for that amount. The HOA can sue in the GDC obtain a judgment and garnish your wages. But, if they actually want to force you to change your property they must sue in the Circuit Court. The Circuit Court is the only place that can enter an injunction forcing you to do or not to do something.

So why does it matter if HOAs can sue in either the Circuit Court or the GDC?: It is best to use a specific jurisdiction as an example, Fairfax. A Fairfax Circuit Court civil case that is actively contested will generally take 8-12 months. Attorneys’ fees are counted in the tens of thousands. For a GDC civil case that is actively contested, the case will generally take 2-3 months, and attorneys’ fees will often run $5,000.00 or less. Another major difference between the two courts is the success of default judgment. Default judgment is what happens when the party being sued fails to properly respond. It is a lot easier to obtain default judgment in the GDC, and a lot harder to overturn default judgment in the GDC.

So aside from cost, time, and ease of default judgment, isn’t the current system good enough for HOA’s?: No. When bringing a lawsuit for violation of covenants the HOA must bring all claims and seek all remedies regarding a transaction or occurrence in the same proceeding, or they are waived. This means under the current system an HOA can not sue in GDC for money, and then later sue in Circuit Court later for an injunction. If the HOA ever thinks it might want the injunction, the entire case must be filed in the Circuit Court.

How does the injunction work anyway?:

The injunction is a court order telling you must or can not do something. If you do not obey the court order you can be held in contempt. In extreme cases contempt can mean jail time (which is unlikely). But, contempt often means fines, and these fines can be a per day fine causing extreme financial hardship.

Is there a way to make SB1327 and its identical house counterpart HB2289 fairer for homeowners?: Absolutely. I described the method to make it fairer in my January 14 post, here.

But the House and Senate committees fixed this bill so it would not be imposing on homeowners, right?: No. The newer version of the Senate bill removes all references to attorneys’ fees being owed to the prevailing party New SB1327. It does not matter if the attorneys’ fees provisions are in or out as attorneys’ fees are already authorized in these types of cases by Va. Code § 55-79.53 and Va. Code § 55-515.

Is there anybody else who loses under this legislation?: Yes the GDC judges will now be required to hold homeowners in contempt. Civil contempt is not something the GDC judges face often, and will be an unwelcome increase in the workload of judges. Land records clerks may be faced with the possibility of being asked to record a GDC injunction, for numerous reasons this is not allowed, and is not authorized by SB1327 and its identical house counterpart HB2289.

Why the concern about the legislative status of these bills?: SB1327 passed out of committee with only two Republican opponents, and the Senate is controlled by the Democrats. HB2289 is uncontested in the House now that it is out of committee. Barring some major shift in attitudes, these bills will pass.

1 comment:

Unfortunately, the General Assembly also empowers the counties to indirectly supplement HOA funding for maintenance violations resolution, by taking on the uncooperative homeowners at the tax payers expense. When a Maintenance Code Violation is presented to the County for resolution, the county does not ask if the property is in a HOA.

As long as this loop hole exists, there is no incentive on the part of HOAs to enforce difficut maintence violations when they can pass them off to the county and taxpayers to resolve.

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